Values-Based Leadership On Unethical Behaviors In Workplace

Abstract

Current literature suggests that the positive aspect of values-based leadership, such as ethical leadership and transformational leadership are essential, specifically in job productivity and job performance. However, many studies have not examined how the two leadership styles influence employees’ unethical behavior through identification with leader. The study of unethical behavior is particularly important as it could lead to the downfall of an organization. Hence, this study investigates both leadership styles in relation to employees’ unethical behavior through identification with leader. A total of 209 full-time working adults (Male=61.7%; Mage=32.21) were recruited through the online survey. The result shows that values-based leadership leads to lower unethical behavior. However, only ethical leadership showed a significant effect on lower unethical behavior. In addition, both values-based leadership lead to higher identification with leader. Identification with leader also leads to lower unethical behavior. Finally, mediation analyses show that identification with leader did not mediate ethical leadership and transformational leadership, and unethical behavior. The findings suggest the importance of having ethical leaders in regulating unethical behavior at the workplace in addition to leaders becoming a role model for employees to emulate. Future studies may investigate other leadership styles and examine how their values affect the employees’ unethical behavior and identification with supervisor.

Keywords: Values-based leadershiptransformational leadershipethical leadershipidentification with leaderunethical behavior

Introduction

Unethical behavior is behavior that goes against the interests of the organization, such as business scandals, corruption, bribery, and many more. These behavior led companies to face the consequences such as bankruptcies, plummeting reputation and risk of closing (Treviño & Brown, 2005). To enforce ethical conduct, researchers have argued that ethics should be well-enforced and adapted by the organization (De Cremer et al., 2010; Lestrange & Tolstikov-Mast, 2013) and one of the most effective methods is through leadership (Treviño & Brown, 2005).

Values-based leadership, which is defined as leaders’ conduct that has underlying moral, ethical foundation with behavior that are rooted in ethical and moral foundation (Copeland, 2014), has been considered to be highly influential in employees’ ethical behavior (Copeland, 2014; Frost, 2014; Treviño & Brown, 2005). Ethical leadership and transformational leadership are frequently used in literature that is found to be more influential in employees’ ethical behavior compared to other value-based leadership styles (Copeland, 2014).

Problem Statement

Although value-based leadership styles have a high positive influence on employees’ job performance (Liu et al., 2013), its relation to employee unethical behavior and the process haven’t been explored much. Currently, the studies have neglected two-sided leadership styles in explaining employees’ behavior; thus, there is no past research investigating the effect of two values-based leadership styles. It is suggested that a leader’s effectiveness is not maximized if the adoption is restricted to only one value-based leadership style since different styles have similar and different characteristics (Copeland, 2014). With ethical leadership and transformational leadership differ in their values, and while both lead to identification with leader (Brown et al., 2005; Kark et al., 2003), their overall relationship with unethical behavior may differ due to the different values each leadership style emphasizes.

Research Questions

This study intends to investigate how both values-based leadership (i.e., ethical leadership and transformational leadership) may lead to lower unethical behavior through identification with leader. The study suggests that leaders who strongly emphasize moral management, vision, values, and intellectual stimulation can maximize influence on employees’ ethical behavior and identification with leader. In addition, through daily interactions with employees within the organization, ethical leadership and transformational leadership provoked followers’ recognition or change in self-concept to have similar ethical values and beliefs with the leader (Brown et al., 2005).

Purpose of the Study

In the Malaysian context, it is seen that unethical behavior is high in cases such as company scandals (e.g. 1MDB) and police corruption. Therefore, it is important to look into the effect of values-based leadership styles in the influence of lowering unethical behavior. Using values-based leadership theory (Copeland, 2014), the current study contributed insights on how distinct and effect of values-based leadership styles (i.e., ethical leadership and transformational leadership) influence the lowering of unethical behavior among employees. The proposed model is illustrated in Figure 1 .

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Research Methods

The current study involved 209 full-time working adults from 17 working industries, classified based on the broad structure of International Standard Industrial Classification (United Nations Department of Economic and Social Affairs, Statistics Division, 2008). The majority of participants were from finance and insurance (28.7%), followed by information and communication (15.8%), professional, scientific, and technical (15.3%), wholesale and retail trade (9.1%), education (7.2%), and other industries. Participants were recruited using the snowballing sampling method from the Malaysian community (Male= 61.7%; Mage = 32.21, SD = 10.77). The inclusion criteria were full-time working adults above 18 years old, working within the same organization, and have been with their direct leader for a minimum of three months. The mean length of working experience in the current organization is 4.13 years (SD = 6.34), and with the current leader is 3.15 years (SD = 5.10). Participants were given a link to the questionnaire through e-mails provided by them. They submitted the questionnaire once they have completed it.

Findings

Figure 02 presented Hypothesis 1 proposes that both (a) ethical leadership and (b) transformational leadership will lead to lower employees’ unethical behavior. Multiple regression was used to test the hypotheses using SPSS version 25. The results show that both ethical leadership and transformational led to lower employees’ unethical behavior. The total variance in the outcome variable (unethical behavior) explained by the model was 4.4%, F (2, 206) = 4.78, p = .009. In this model, only ethical leadership is statistically significant and make a significant unique contribution to the prediction of unethical behavior (β = −.30, p = .006). However, transformational leadership is not statistically significant and did not make a significant unique contribution to the prediction of unethical behavior (β = −.13, p = .23). Hence, Hypothesis 1 is partially supported.

Hypothesis 2 proposes that both (a) ethical leadership and (b) transformational leadership will lead to higher identification with leader. Multiple regression was used to test the hypothesis. The results show that both ethical and transformational leadership led to higher identification with leader. The total variance in the outcome variable (identification with leader) explained by the model was 60.8%, F (2, 206) = 159.74, p<.001. In this model, both variables were statistically significant with ethical leadership recording a higher beta value (β = .50, p = .001) compared to transformational leadership (β = .33, p = .001). The results tell us that ethical leadership makes a stronger unique contribution in explaining identification with leader compared to transformational leadership. Hence, Hypothesis 2 is supported.

Hypothesis 3 proposes that identification with leader will lead to lower unethical behavior. Linear regression was used to test this hypothesis. The result shows that identification with leader led to lower unethical behavior. The total variance in the outcome variable (unethical behavior) explained by the model was 2%, F (1, 207) = 4.18, p = .042. Identification with leader leads to lower unethical behavior (β = −.14, p = .042). This tells us that identification with leader led to lower unethical behavior. Hence, Hypothesis 3 is supported.

Hypothesis 4 proposes that identification with leader will mediate both ethical leadership and transformational leadership, and employees’ unethical behavior. In testing the hypothesis, the Monte Carlo test was used (MacKinnon, Lockwood, & Williams, 2014). When both leadership was combined, ethical leadership was found not to have a significant effect on employees’ unethical behavior through identification with leader (95% confident interval [CI], lower level [LL] = -.1058, upper level [UL] = .07387). Transformational leadership was found not to have a significant effect on employee unethical behavior through identification with leader (95% confident interval [CI], lower level [LL] = -.02681, upper level [UL] = .01892). This tells us that identification with leader did not mediate ethical leadership and transformational leadership, and unethical behavior. Hence, Hypothesis 4 is not supported.

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Conclusion

This study investigated if both ethical leadership and transformational leadership styles will lead to lower employees’ unethical behavior and higher identification with leader. We also look into how identification with leader leads to unethical behavior. In addition, we investigated if identification with leader mediates the effect of ethical and transformational leadership style and employees’ unethical behavior.

Overall, we found that both ethical leadership and transformational led to lower employees’ unethical behavior, but transformational leadership is not statistically significant and did not make a significant unique contribution to the prediction of unethical behavior. Secondly, both ethical leadership and transformational led to higher identification with leader that ethical leadership makes a stronger unique contribution in explaining unethical behavior compared to transformational leadership. Next, identification with leader is found to lead to lower unethical behavior. However, the mediation effect of identification with leader between the impact of ethical and transformational leadership styles on employees’ unethical behavior was not significant.

Firstly, the current study found that both leadership styles can only explain a minimal variance of employees’ ethical behavior with transformational leadership does not contribute a unique, significant association with unethical behavior. It can be explained that transformational leadership is not characterized to associate with ethics and brings moral development among employees (Dvir et al., 2002), therefore, it does not relate to employees’ unethical behavior. Hypothetically, a transformational leader can have high visions and expectations for individual/group achievements without intervening by judging employees’ unethical behavior, for instance, the offering of a bribe to close sales, given that this does not affect the interest of the leader or the group. Therefore, the transformational leadership style that does not punish nor encourage unethical behavior is not associated with employees’ unethical behavior.

On the other hand, ethical leaders who uphold and communicate unethical standards consistently does not accept such unethical behavior and therefore, will discipline such behavior (Brown & Treviño, 2014). New employees will observe and learn that such behavior, for instance, bribery to close sales case is not acceptable and will be punished; hence, they will not behave unethically. Together, the findings show that ethical leadership style is related to lesser employees’ unethical behavior, but transformational leadership style is not related to employees’ unethical behavior.

The partially supported result based on Copeland (2014) may infer that to instill ethics in employees’ behavior, ethical leaders are more suitable to be hired or to be trained, compared to transformational leaders. Especially, given that organizational goal is to instill business ethics to combat bribery and corruption practices among the employees (Lestrange & Tolstikov-Mast, 2013), or when ethics are important for trust among leaders and employees during the implementation of change (Treviño & Brown, 2004). With the right person to initiate and maintain ethical standards and conducts, employees will behave more ethically; hence, an organization would encounter lesser financial loss and lawsuits (Brown & Treviño, 2006).

Secondly, both ethical leadership and transformational leadership styles explained a moderately large variance of identification with leader. Together, the result is consistent with Copeland (2014) theory in which both leadership styles are associated with the highest positive short-term and long-term leader effectiveness in identification with leader. In other words, both leadership styles can evoke employees’ recognition or change in self-concept such that their values and beliefs are similar to the leader (Kark et al., 2003). It can also be that employees identify with leader because they perceive the leader to have similar values and beliefs like them. Hypothetically, an ethical leader influences through modelling, which can evoke similarity in self-concept among employees. However, it can also be that employees hold high ethics in work, so they are willing to identify with an ethical leader who models ethical conducts.

The significant result of ethical leadership and transformational leadership explanation of identification with leader (Copeland, 2014) infers a new insight, that is, employees may identify with the leader simply through the way how the leader behaves (ethical or not), and what is expected from the leader (motivated or not). Such a leader has the traits of both ethical leadership and transformational leadership; consequently, the leader emphasizes both ethics and motivation elements at work. Therefore, employees may find that such leaders can emphasize practicing job scope ethically as well as empowering employees at work. Hence, identification with leader.

A new insight gained here is that unethical behavior is an ethics-related outcome, but identification with leader can be regarded as not an ethics-related outcome, given that employees could also identify with leader regardless of the ethical grounds. There is a possibility that transformational leadership measured in the current study is not related to an ethics-related outcome that it does not associate with employee unethical behavior but associate to identification with leader.

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